Since Summer school is apparently as popular with my commenters as with the students that need to attend it, we will move on. The first topic of the evening is one of our favorites. Who killed Hostess, greedy owners/mgrs, greedy employees or healthy Americans?
My gut feel is that the Baker's Union did, but I know little about this. I just can't figure who throws a strike when the company is on the bankruptcy rocks. Kind of like jumping on top of the goose (golden eggs) when it has pneumonia.
NY Post Hostess Out of Business
CNN Hostess Mediation Fails
ABC Talks Fail
CNN Bonuses Too Sweet
The second topic is, what do you think of the Walmart strike talk?
CNN Walmart workers to strike
WP Strike
MPP CNN Confronts Walmart
I guess I think that raising compensation at Walmart and raising the minimum wage have the same problem. It would likely start a cycle of inflation, for better or worse. Operating costs go up and then the prices start to go up. I am not sure if the people who work these low education, low responsibility, low skill jobs would be better or worse off. And I can guarantee those without jobs would be worse off.
I think the bigger question is how do we bring more low education, high skill, high responsibility jobs back? That way we can pay more without over paying. (hint: Buy American)
Thoughts?
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28 comments:
Employees made a lot of concessions over the years. In any event, it doesn't make sense for any supplier to make concessions to any company on the brink of bankruptcy. That's because companies on the brink of bankruptcy almost always topple over it, and any concessions made prior to bankruptcy become the starting part for post bankruptcy negotiations. Hostess Brands, what should be a fairly simple cash flow business, is struggling under a mountain of debt inflicted on it by a series of corporate manipulators who had nothing substantive to offer the business itself. If you take away the debt, which bankruptcy does, the business would be ok, not great, but ok.
--Hiram
In terms of inflation, when Wal Mart gets an increased energy bill, do they refuse to pay it on the grounds to do so would be inflationary? Do they refuse to raise dividends to their shareholders or salaries for their managers because of inflation concerns? Do they not raise prices when they can, because they worry about the value of the dollar? Why are such macroeconomic concerns an issue only when dealing with slightly above minimum wage employees?
--Hiram
Source regarding leveraged buy out theory? I haven't heard that from any of the news sources.
If all of Walmart's employees go from $12/hr to $24/hr, someone will have to pay... Who do you think that would be?
Wiki Hostess Brands
If all of Walmart's employees go from $12/hr to $24/hr, someone will have to pay...
Maybe no one will. Maybe that would provide an incentive for Wal mart to grow, to get more out of the dollars they pay for the various expenses of their business.
--Hiram
Please explain further.
Wage increases without not accompanied by an increase in productivity are inflationary and force companies to cut staff and, eventually, move offshore or completely go out of business. Labor unions are thus the enemies of ordinary workers.
So long as there are people willing to work at Walmart for the paycheck they receive, what business is it of ANYBODY (especially a union with no stake at all)?
This "buy American" idea just isn't well thought out. If you want to buy American, then you should be seeking changes to US economic policy that reduces taxes, promotes investment, and eliminates excess regulation on business, so that they will CHOOSE to make their products here.
J. Ewing
"Wage increases without not accompanied by an increase in productivity are inflationary and force companies to cut staff and, eventually, move offshore or completely go out of business. Labor unions are thus the enemies of ordinary workers."
There have been massive increases in productivity without corresponding increases in wages for over a decade now. Has this been deflationary? And costs for business change all the time without any particular impact on inflation at all time. Mitt Romney makes about 14 million dollars a year from Bain, a company he hasn't produced anything for in over a decade. Are his wages from his former firm inflationary?
--Hiram
Hiram,
Of course it has been "deflationary", kind of. Our CPI would have been much higher if it wasn't for the productivity gains and "low cost" goods from other countries. And we wouldn't have nearly as much cool stuff. The blessing and cost of keeping wages low.
Wiki Inflation
Measuring Worth
AEIdeas No Wage Price Spiral
I don't think Romney has "wages", he has investment returns.
"If you want to buy American, then you should be seeking changes to US economic policy that reduces taxes, promotes investment, and eliminates excess regulation on business, so that they will CHOOSE to make their products here."
So you would like America to be more like China, Vietnam, Mexico, etc? Even I can understand that that is not a good idea. Forbes China
The reality is that American's will need to be willing to pay some more to maintain their high standard of living. If we don't support our own companies and employees, who will?
The alternative is we will continue to grow more similar to those we compete with. Their quality of lives will improve and ours will stagnate at best... (or get worse)
Though I do agree that we can not subsidize American's that don't want to help row our boat. Free loaders are an anchor that kills our ability to compete.
G2A Made In America Really?
G2A Believe in America
I don't think Romney has "wages", he has investment returns.
Is money that isn't tied at all to productivity less inflationary when it spends that money that is? Does it come in a different color?
--Hiram
Lost me. Try again.
The argument seems to be that money received as investment income is somehow different from money earned through work. It isn't. It's the same money. And in terms of inflation, which has to do with the value of money, where the money comes from is irrelevant. What matters is where it is and where it goes.
The problem is not that we have too much money, something that has an inflationary impact, but that we don't have enough. Despite productivity gains, wages are stagnant. If we relate the value of money to productivity, the problem is deflation, not inflation.
--Hiram
The problem is this. Consider our economy as a pie. For a long time now, we have been fighting over how the portions of the pie are to be divided. For decades now, workers and the middle class have been losing this battle, seeing more and more of the pie allocated to managers or the rentier class. We have been redistributing not creating wealth, and we have been creating wealth in the form of bubbles that turns out to be illusory. People make huge amounts of money from businesses without making the businesses better. This economics has failed us, but the extent and nature of this failure is not even now widely understood. We, or at least many in the media and political classes, still listen to people like the heads of the big banks instead of jailing them. The Republicans nominated for president the very archetype of this failed view of the world, Mitt Romney and to my amazement, there were people out there who took him seriously, although I do think one of the reasons he lost is that somehow the American people understood on some intuitive level, the extent that Mitt was a man of the past as opposed to being a man of the future.
--Hiram
"So you would like America to be more like China, Vietnam, Mexico, etc? Even I can understand that that is not a good idea." -- John
John, you need to have seen what I have seen about "keeping jobs here." At one point, we attempted to outsource part of my plant's manufacturing to the Philippines; workers there made about 10 cents/hour back then, and it was good money for them. Then we started seeing the figures. Each worker produced about 20 pieces/hour (by hand), or 0.5 cents/piece. Here in the USA, we paid each worker $12/hour (a good union wage at the time) and gave him a big 100-ton roll-fed press to work with. That machine made 20 pieces per stroke at 20 strokes/minute, so the cost was roughly .05 cents/piece! Of course, we had to pay the greedy capitalist something for buying us the machine, but that is the beauty of our capitalist system, that we CAN compete (and easily) so long as wages are consistent with productivity gains and do not crowd out investment. Of course, poor management also causes business failures, but one of those poor decisions is to give unions raises beyond productivity and ceasing investment in productivity to do it. GM would be a much better business today had they either taken strikes years ago to hold down wages and preserve investment, or gone bankrupt in the style Hostess did, where union contracts are eliminated for the new owner. Has anybody noticed that it is union businesses which tend to decline and die, while non-union businesses (or with cooperative unions, like the Japanese model) thrive?
The US used to lead the world in steel production. Then the unions got greedy and drove out investment. The Japanese entered the market with better products and lower costs. (At the time, Japan's oldest steel plant was younger than the youngest one in the US.) Bain capital invested in a US steel company and they now have doubled (or tripled) in the number of employees. What about this scenario would you like to change; cutting Bain out of the equation so that evil Mitt Romney didn't get paid?
J. Ewing
Hiram,
There is a key difference between some earned income and investment income. And I think that is the point of this discussion.
Investment and most earned income (ie non-union) operates in the free market. People only make what they are worth to that market. If the investment funds or personal skills are deemed more valuable, they get a higher return. (ie no strikes required)
Where as organized labor attempts to raise the compensation of individuals above their personal "market worth". And this difference between their compensation and "market worth" is a waste or unnecessary benefit that has to be paid for by someone.
It has various negative consequences, especially when you are competing against other countries and companies that do not have to pay it. As we have seen in the case of Hostess, GM, etc.
So arbitrary wage increases due to raising the minimum wage or a union contract simply increase this unnecessary waste / benefit, thereby increasing costs for us all and putting their organization and our economy at risk.
Why our economy? Every company and employee that operates here has to pay more for the wastes/benefits. Therefore it becomes more expensive to operate in the country, which pushes jobs elsewhere.
This was ok when the other countries were a wreck after the world wars, trade barriers were in place, communication was expensive, transportation was expensive, Buy American was popular, etc. Not such a good idea now that competition is intense and American's brand loyalty has shifted to "buy foreign"...
J,
I don't disagree that unions are a problem and automation can do wonders in reducing product cost. (ie overcome low wage benefit) The challenge is that producing product in the USA on high tech robots and equipment that comes from Germany, Japan, etc still leaves us with a big problem.
What to do with the 80 of 100 workers that were displaced by the automation. And yes the automation needs maintenance, programming, loading, unloading, etc. But the reality is that the huge cost reduction occurs because fewer employees are now needed by the company to create the same output..
I guess they can go work at Walmart...
Unions are declining to the point of being a non factor in our economy. This is particularly true in areas where the economy is growing. That being the case, why do they loom so large in the imagination of many?
The movie, "Norma Rae" was made a long time ago.
==Hiram
My own view about the union issue, is that unions provide a needed scapegoat to explain the failure of conservative policies.
--Hiram
Every product or service built or provided here bears the burden of the unions that remain. (ie public and private)
As I repeatedly say, if they were guilds that trained, demanded and rewarded excellence from their memberships it would be different. (ie value add) Instead they strive to protect all their members and maximize their rewards on the basis of seniority.
Therefore many employees are paid far more than they are worth in the open market and some far less. This raises the cost of doing business in the USA.
For the union members it is a good thing until they drive so much waste that the golden goose dies.
That why the Public Employee unions are so problematic. The waste generated by them is spread into every aspect of our economy. If they kill the goose, it is going to hurt.
Therefore many employees are paid far more than they are worth in the open market and some far less.
Employee wages aren't determined in the marketplace. You don't bid for your job every morning; it's a rare job that's listed on eBAy.
--Hiram
Of course the employment market sets the compenstion level for most of us. If there are too many roofers in a community, the wage will decrease until some exit the field. Same for engrs, accountants, etc.
Of course the Unions try to control this natural variation through compensation and head count contracts.
I can't imagine how much waste there was before the caboose was finally eliminated.
Caboose
Train Crews
"What to do with the 80 of 100 workers that were displaced by the automation. " -- John
They can go to work MAKING or servicing the machine tools that displaced them, if they have or can get the necessary skills and, if they can't, what does that say about our education system, and about the government policies that drove THOSE businesses overseas? Industrial robots weren't invented in Japan, but Japan makes them better and cheaper, and NOT because of low wages. Their unions are cooperative, they place a high premium on education and hard work rather than featherbedding (an old railroad union term, BTW) and they invest heavily in their businesses for ongoing productivity.
The US has long been transitioning to a service industry economy, partly because we have so hampered our own manufacturing businesses with forced unionization, overregulation and high taxes, plus a lack of capital formation. But also because some jobs-- like McDonalds servers, cannot be done in India or Turkmenistan. That's our problem and our opportunity. If we want to "buy American" other than services, we need to curtail the government policies (including granting unions their monopoly power) that created the problem.
J. Ewing
I blame the lawyers and our country's greed... (ie the employees, unions, managers, investors, free loaders, consumer,etc)
Lawyers and Engineers
Greed is good! It is a motivator and has worked wonders on the American economy-- the greatest in the world. And then the parasites came. The US has 7 times the number of lawyers per capita as Japan, and those lawyers go into politics. They often spend many times what the office pays out in salary to get the job, yet leave office wealthy.
This country got rich in an unregulated free market, and some amount of abuse needed to be corrected by government regulation and union power. That was 100 years ago and since then we've been going pretty much in the wrong direction.
J. Ewing
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